Online shopping shifts into second gear as retailers up their game

Australian's online shopping last year grew at nearly twice the rate it did in 2016, new figures show, with e-commerce now providing major support to an otherwise anemic growth in Australia's $300 billion retail sector.

The growth in online shopping has accelerated.Credit:Jim Rice

New research by Australia Post based on parcel delivery volumes estimates that total e-commerce spending on physical goods grew 19.2 per cent in 2017 to $21.3 billion.

That rate of growth had accelerated from 2016, when it ticked up by 11.5 per cent.

Australia Post's general manager of eCommerce and International, Ben Franzi, said that while lower prices, access to a wider range of products and convenience were the major factors for people shopping online, retailers were contributing to its popularity by improving their service.

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"Retailers are also investing in making the online shopping experience more seamless, particularly with making returns more convenient, which is also encouraging more people to buy online," Mr Franzi said.

Australian retailers account for about 70 per cent of all online shopping, he said.

Clothing and fashion was a key driver of e-commerce growth, increasing 27.2 per cent last year after growing 16.7 per cent in 2016, Australia Post said.

"We expect that growth to continue as the market matures," Mr Franzi said.

American e-commerce giant Amazon opened its Australian operations in December, with the expectation that would accelerate consumers' shift online.

National Australia Bank research released this week showed online retail sales increased 14 per cent in January compared to the same month last year.

The Australian Bureau of Statistics released on Tuesday estimated that online sales accounted for 4.7 per cent of total retail turnover in January compared to 3.6 per cent in January 2017.

NAB's data, crunched with analytics firm Qantium, suggests Australians spent around $24.7 billion online in the 12 months to January, which would equate to almost 8 per cent of the spending at bricks and mortar retailers.

In good news for Myer and David Jones as they try to pivot their businesses towards e-commerce, department stores saw had the best online growth in January, jumping 21 per cent compared to 12.6 per cent growth last January, NAB said.

The toys and games category grew at the same rate, compared to 15.3 per cent last year.

Australia Post's research also highlights the impact of online shopping events, with stand-out growth in May when Click Frenzy is held, growing 9.6 per cent month-on-month growth in 2016 and 32.2 per cent in 2017.

For November, when there is another Click Frenzy event, and last year local retailers embraced Black Friday and Cyber Monday promotions, sales grew 16 per cent month-on-month in 2016 and 18.7 per cent in 2017.

The ABS revealed total retail sales grew 0.1 per cent on a seasonally adjusted basis, below the economists' consensus forecast of 0.4 per cent. It followed a 0.5 per cent fall in December.

On a year-on-year basis sales grew 2.3 per cent in January, which was better than December's 1.6 per cent but still below the 12 month average of 2.6 per cent.

Maquarie researchers said domestic online sales growth now accounted for more than half of the total growth in retail.

"If you needed a statistic to summarise the disruption currently occurring in Australian retail, it is this," Maquarie said in a note to clients.

"A year ago the share was half that, and two years ago it was less than 10 per cent."